Answer :
To prepare a Vertical Statement of Profit and Loss for MAS Agro Ltd for the year ended 31-3-2017, we start by organizing the given information into an income statement format. This involves listing revenues, subtracting expenses, and accounting for any adjustments to reach the net profit.
Income Statement:
Revenue from Operations:
- Sales: [tex]\text{₹} 450,000[/tex]
- Less: Sales Return: [tex]\text{₹} 20,000[/tex]
- Net Sales: [tex]450,000 - 20,000 = \text{₹} 430,000[/tex]
Add: Other Income:
- Interest on Investment: [tex]\text{₹} 100,000[/tex]
Total Revenue:
[tex]430,000 + 100,000 = \text{₹} 530,000[/tex]Expenses:
- Opening Stock of Raw Material: [tex]\text{₹} 60,000[/tex]
- Add: Purchases of Raw Material: [tex]\text{₹} 250,000[/tex]
- Less: Closing Stock of Raw Material: [tex]\text{₹} 40,000[/tex]
Cost of Raw Material Consumed:
[tex]60,000 + 250,000 - 40,000 = \text{₹} 270,000[/tex]- Employee Benefit Expenses: [tex]\text{₹} 40,000[/tex]
- Audit Fees: [tex]\text{₹} 10,000[/tex]
- Add: Outstanding Audit Fees: [tex]\text{₹} 20,000[/tex]
Total Audit Fees: [tex]10,000 + 20,000 = \text{₹} 30,000[/tex]
Total Expenses:
[tex]270,000 + 40,000 + 30,000 = \text{₹} 340,000[/tex]Net Profit Before Tax:
[tex]530,000 - 340,000 = \text{₹} 190,000[/tex]
Additional Information:
The receivable interest on investment is not relevant to the Profit & Loss statement as it deals with cash movements and we are preparing an accrual-based statement.
Outstanding audit fees are accrued expenses and need to be included in the calculation.
The Profit and Loss Statement provides a clear picture of the company's profitability by showing how much profit the company made after all expenses were deducted from revenue. The vertical format helps in comparing individual line items as a percentage of total revenue, aiding in effective financial analysis.
